March 2023 Newsletter

With Autumn underway, the changing season is a reminder to take stock and prepare for what’s ahead as the financial year heads towards its final quarter and the May Federal Budget.

The gloomy prospects for economic growth, both in Australia and overseas, are occupying the minds of investors, businesses and political leaders.

The Reserve Bank of Australia believes global growth will remain subdued for the next two years and that Australia‘s economy will slow this year because of rising interest rates, the higher cost of living and declining real wealth. The RBA forecasts the unemployment rate, currently at a low 3.5%, to rise by mid year and inflation, which was 7.8% over 2022, to drop by around 2-3% over coming years thanks to an easing in global prices that will eventually flow through to Australian prices. Oil prices fell almost 3% in February reversing the increase of the previous month.

There have been some economic bright spots recently such as the rebound in retail trade in January of 1.9% after a 4% plummet in sales figures in December. And, Australia‘s current account surplus increased $13.3 billion to $14.1 billion in the December quarter 2022 supported by sustained high commodity prices including $400 billion worth of mining commodity exports during 2022.

That positive news was enough to lift the Australian dollar slightly to just over US67c, halting a slow decline during February.

Australian shares were down by almost 3% during February, while US stocks were down by just over 2% for the month and more than 7% for the past year.

King and Whittle acknowledged International Women's Day, March 8 - a day of celebration, reflection and commitment to the rights and struggles of women worldwide whether in business or society. Everyone has a role to play in the support and commitment to the work that remains. King and Whittle continues to commit and renew its efforts to ensure all women have an opportunity to reach their full potential.

Tax Alert March 2023

Family trust rules and new guidance on contractors

The Australian Taxation Office (ATO) has confirmed its position on family trust distributions, while also providing employers with new information to simplify completion of Single Touch Payroll (STP) activity statements. Here are some of the latest developments in the world of tax.

Prefilling of PAYGW

Completion of PAYG withholding via STP will become easier for employers when the ATO begins prefilling some of the required activity statement data.

From the July 2023 statement, PAYG withholding labels W1 and W2 will be prefilled for all monthly PAYG employers. Quarterly withholders will find the information on their September 2023 statement.

The ATO is also piloting an employer reminder system for businesses with a late activity statement and STP-reported PAYG withholding. If you fail to lodge by the reminder date, the ATO will consider there are no corrections to report and the recorded amounts will be added to your client account.

Final rules on family trusts

Taxpayers with family trusts should check the implications of the ATO’s final guidance on the taxation of family trust payments, as the new rules may reduce the attractiveness of these tax structures.

Under the ATO’s new approach, common tax planning strategies relying on the section 100A exemption covering trust distributions to companies and family members may no longer be available in some situations.

Taxpayers with a discretionary trust should discuss the implications with us, particularly where there are parent controllers of the trust and adult-aged child beneficiaries. The ATO website provides a number of case studies outlining common situations.

Employees vs. independent contractors

The ATO is consulting on its new draft guidance covering both classification of employees and independent contractors, and its proposed compliance approach in this area.

The draft guidance outlines the regulator’s priority areas, which include situations where particular risk factors are present and where an unpaid superannuation query has been received from a worker.

The guidance also indicates employers must have specific advice from an appropriately qualified third-party confirming their classification of a worker as a contractor is correct.

Recordkeeping for self-education expenses eased

Taxpayers claiming self-education expenses will find things a little easier this tax time, as new legislation has removed the requirement to exclude the first $250 of deductions for education courses.

The new rules can be used when completing your 2022-23 tax return, while for employers, the change applies to the Fringe Benefits Tax year starting 1 April 2023.

Providers of ride-sourcing and short-term accommodation services will find themselves swept into the compulsory Taxable Payments Reporting System (TPRS) from 1 July 2023.

Electronic platform operators for these services (such as Uber and Airbnb) are required to report all transactions involving Australian purchasers under new legislation passed in December 2022.

Annual TPRS reporting is already compulsory in industries such as building and construction, cleaning, courier and security services.

Plug-in hybrid electric vehicles to face FBT

Under rules applying from 1 April 2025, plug-in hybrid electric vehicles will no longer be considered zero or low emissions vehicles and will not be eligible for the fringe benefits tax exemption applying to these vehicles.

You can apply for the exemption if the hybrid vehicle was exempt before 1 April 2025 and there is a financially binding commitment to continue providing private use of the vehicle after this date.

No business activity could mean no ABN

The ATO is again reminding small businesses their Australian Business Number (ABN) may be flagged for cancellation if there is no reported business activity in their tax return, or no signs of business activity in other lodgements or third-party information.

If an ABN is identified as inactive, the ATO will contact the holder by email, SMS or mail to check if the ABN is still required and explain the action required to keep it. Where the business is no longer operating, the ABN will be cancelled.

Guide to business grants

It’s been a tough few years for many businesses, with the pandemic and natural disasters, especially small business owners.

Finding funds and expertise for business development can be challenging for smaller organisations. Even larger firms can find it difficult to put together the cash and know-how to keep a business expanding.

That’s where a grant of funds or professional support can help.

What can I get a grant for?

You will find grants supporting all aspects of business operations offered by state, territory and federal government agencies and departments that cover many different business needs.

Some grants are available for several years while others are just a short-term funding opportunity so be sure to check the closing dates.

Some examples include:

Digital solutions

An effective online presence can make or break a small business but knowing where to start might be holding you back.

There’s a Federal Government program that helps small businesses access digital tools to create websites and sell online, use social media and business software and ensure online security and data privacy.

The Australian Small Business Advisory Services program provides seven hours of support with a digital solutions advisor to businesses with fewer than 20 full-time employees.

Recovering from natural disasters

Businesses affected by the floods or Black Summer bushfires can apply for support from the AusIndustry Entrepreneurs’ Program.

Under the program, a facilitator identifies ways to improve your business systems, operations and strategies.

Each state affected by a recent disaster also provides grants and loans to small businesses such as the Queensland governments low interest Disaster Assistance Loans of up to $250,000.

New ideas

If you have a business idea but you just need a little help to get it across the line, the AusIndustry Entrepreneurs’ Program is an option.

The Program’s Accelerating Commercialisation service provides advice and funding to get novel products, processes or services to market.

Selling overseas

Exporters or those interested in starting to sell overseas can find useful information, advice and financial support from government agencies.

Export Australia provides small to medium businesses with loans to secure specific export contracts when traditional lenders can’t help. Export Finance Australia will give approved export businesses a guarantee to help access finance from their bank or there’s a Small Business Export Loan that covers up to 80 per cent of the costs to secure an export contract.

State and territory governments also offer exporters support such as the Going Global Export Program in New South Wales for businesses in the health and medtech, technology, and food and beverage sectors or the Export Fundamentals Program for South Australian businesses looking to expand or to start exporting.

Regional and rural support

Various levels of government offer funds and professional support to small businesses operating in country areas. For example, there is a three-year payroll tax exemption to interstate businesses relocating to regional Tasmania.

In NSW, the state government will match funding for projects in regional areas that are time-sensitive and strategically significant. While in Victoria, a government program provides incentives to regional hospitality and tourism businesses to take on trainees and to develop and retain jobs in other sectors.

Employment

Wage subsidies are available when you employ certain eligible individuals such as long-term unemployed, apprentices and trainees or people with a disability.

Where to find information

To find information about government grants, visit the business.gov.au website. It outlines the business grants and programs offered by agencies from every level of government across Australia.

Each state and territory government has a database of their grants and programs. And, check your local council’s website for opportunities.

How to apply

Firstly, read the requirements to make sure you are eligible, you will then be steered through a series of questions.

Remember to provide as much relevant information as possible to help your chances.

If you would like to discuss how to make the most of a business grant in your business, give us a call.

Time to refinance? Considerations for mortgage holders and businesses

With the cost of living continuing to rise, it can feel increasingly hard to make ends meet in terms of your personal finances, and it can also be challenging running a business in an inflationary environment. One way of combatting inflation is to reduce the escalating cost of borrowing by reviewing your current arrangements.

A new record has been set for refinancing, with more than $19.5 billion of loans changing lenders in late 2022.ⁱ If you’re feeling like it’s time you reviewed your borrowing arrangements – either from a personal or business perspective, here are a few things to consider.

Tips for mortgage holders

With rates on the rise, it makes sense to shop around for the best deal. That could mean replacing your existing home loan with another loan from either your current lender or a different financial institution.

If you are refinancing with your current lender, the process can be simpler as your lender already has all your information and it can be easier to renegotiate than switch to a different provider. You may also incur lower or fewer fees by sticking with your current lender, but this will vary according to providers and loans. External refinancing is generally a little more complex but gives you the opportunity to compare providers.

Things to consider when comparing providers and loans include:

Interest rates

Seeking out a lower interest rate is usually the first thing on people’s minds when they review loans and providers. But it’s important to weigh up other factors as well.

Timing

Fixed rate and introductory period loans can be lower to start with but generally revert to a standard variable rate after a predetermined period so it can make sense to review your situation before the fixed rate ends.

Loan term and payment frequency

Adjusting your loan term and home loan repayments could potentially save you money over the life of the loan.

Access to more loan features

Features such as an offset facility or splitting your loan may be appealing. Some lenders also offer cashback deals, although it is important to weigh up what the loan offers rather than be swayed by the promise of a cash give away.

Tips for small businesses

For businesses it also might be time to review your borrowing arrangements.

If you have a loan and your financial situation and credit score have improved over the course of your loan repayments, you might also be in a position to take advantage of a lower rate and more favourable terms than your current loan.

Some things to consider as a business include:

Consolidating existing debts

If you have multiple debts incurring high interest repayments it can also be beneficial to combine them into one loan at a lower rate.

Changing the loan amount or the term of the loan

It’s common for businesses to refinance to take advantage of the equity built up in their business and that may mean increasing their borrowings. If expenses are increasing or you are seeking greater cashflow you can refinance your loan amount to be repaid over a longer term and decrease your monthly repayments.

Removing a secured asset

If your home or another personal asset is being used as collateral for your loan and your business is now in a position to borrow without it, you may wish to consider switching from a secured to an unsecured loan.

There are also other ways of accessing finance as a business, including having an overdraft or invoice finance where money is loaned against unpaid invoices, that you may wish to explore.

It’s important to evaluate each method of borrowing or accessing finance and review your situation on a regular basis to ensure your arrangements suit your needs and that you are not paying too much in the way of fees and interest. If you are considering changing providers to seek a better deal, make sure you weigh up all the pros and cons of making the switch and the various deals on offer.

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